Euro And Dollar Are Equal For First Time In 20 Years–Here’s What It Means For Americans
ForbesDec 28, 2022
The Facts
The euro has dropped below parity against the US dollar for the first time in 20 years as investors and currency traders take stock of persistent threats to economies around the globe.
These include the continuing fallout of the war in Ukraine, which has spiked global energy prices, and the ongoing risk posed by inflationary pressures with central banks hiking interest rates in response.
The Spin
Narrative A
US tourists in Europe will benefit from the waning euro, just as European tourists in the US will feel the sting of a pricier dollar, but the continued strength of the dollar could spell trouble for US exports and economic growth in general.
Narrative B
The European Central Bank, in contrast to the US Federal Reserve, has been sitting on its hands as inflation has spiked around the globe. It will now have to consider rate hikes to defend the euro while weighing the impact on Southern Euro economies that are already close to crisis.
Cynical narrative
For fiat currency skeptics, this marks the start of a "doom loop" that will see the fall of the fiat currency system as foreign currencies collapse against the dollar, with the dollar losing purchasing power at home. The result, according to some maximalists, will be the emergence of a new global standard: bitcoin.